Thursday 1 December 2011 22.01 EST
First published on Thursday 1 December 2011 22.01 EST

The government is planning to review official targets for reducing poverty, arguing that simply comparing relative incomes leads to perverse incentives and does little to promote better life chances.

The move was signalled by the work and pensions secretary, Iain Duncan Smith, and David Cameron in the week that the government was forced to admit that its autumn statement will mean another 100,000 children brought into child poverty under the measure enshrined in law by the Labour government. Labour set the target of eliminating child poverty, so no household has an income of 60% or below the national median, by 2020.

But Duncan Smith described that approach as hugely expensive and said: "It looks set to have failed." He argued: "Levels of family income are just an approximate and by no means perfect measure of family wellbeing. I do believe that increased income and increased wellbeing do not always follow the same track."

Cameron also attacked Labour's primary measure of child poverty, saying: "I think there is a real problem. Because it is done on relative poverty, it means that if you increase the pension, that means more children are in poverty. I think that is illogical. It doesn't make any child in this country poorer because you are giving pensioners more money at a time when they need it.

"I think what we've got to start doing is measuring how we help children out of poverty and keep them out of poverty."

Duncan Smith went further, suggesting state provided income could actually have a negative impact. "Take a family headed by a drug addict or someone with a gambling addiction: increase the parent's income and the chances are they will spend the money on furthering their habit, not on their children. According to the relative income poverty figures they might be above the line, but by any reasonable measure of long-term life chances they would be stuck firmly below.

"Or take a family where no one has ever worked. Increase their benefit income – while taking no other proactive action – and you push the family further into dependency, only increasing the chance that their child will follow that same path as an adult. So while income is important we should be clear that the source of that income can have very different effects."

He added: "Income through benefits maintains people on a low income, whereas income gained through work can transform lives."

Duncan Smith's aides said he was not planning to repeal the Child Poverty Act, but his remarks mean the target is no longer going to be a central goal of government policy.

Picking up some analysis made for the coalition by Frank Field, the Labour former welfare minister, Duncan Smith said: "The public debate on poverty is still overwhelmingly focused on the narrow relative income measure. This focus drives a number of perverse incentives in the way that governments have approached policy." This led to policy such as tax credits being targeted at families just below the poverty line, he said.

Focusing on child poverty risked ignoring the plight of working age poverty, Duncan Smith claimed. "Simply pulling people out of poverty with increased welfare payments is a dangerous and ineffective strategy," he said. Support for early years, family relationship advice or health visitors may be more important in boosting life chances than welfare payments.

The child poverty debate came as the shadow home secretary, Yvette Cooper, published a breakdown of the autumn statement showing women would lose over £1.5bn from the measures.

Of the changes to tax credits and capped public sector pay amounting to £2.37bn, Cooper said 73% would come from women, who would lose £1.73bn while men would lose £640m. Her figures were calculated by the House of Commons library. She then looked at all the changes since the 2011 election and showed that of the £18.9bn the government is raising each year, £13.2bn is from women and £5.7bn from men.

The Labour leader, Ed Miliband, said: "Let's be clear – this is the biggest attack on women in a generation."